Economics syllabus

1. Introduction to Economics:

Focus:
Understanding the basic concepts of:

 MacroEconomics – Poverty, Growth, Employment etc

 Microeconomics – decisions/choices made at a company, household or an individual level

 Difference between Growth and Development; indicators used to measure.

 Example: To measure Growth- GDP is used and for Development – HDI (Human Development
Index)

 National Income Accounting – Gross National Product (GNP), Gross Domestic Product (GDP),
Gross National Income (GNI), Factor cost, Market Price, Purchasing power parity(PPP), Per-
Capita Income (PCI) – a general understanding on how they are calculated and what all factors
go into their calculation
 Example: GDP is calculated using either of the following 3 methods- production method,
expenditure method, income method.

 Primary , Secondary, Tertiary Sectors – what constitutes each sector? What are their
contributions to the GDP
 Example: Primary sector covers agriculture and allied activities, mining . It contributes 13.7% to
India’s GDP

 Capitalist, State, Mixed Economic System – which type of Economic system India has adopted
and why?

2. Growth & Development

Focus:

 Poverty– concepts like Below Poverty line (BPL), Poverty Gap, Poverty estimates by National
Sample Survey Organisation (NSSO), which Institution in India decides on Poverty line-
Planning Commission
 Different Committees set-up to measure poverty, methodology used – Alag committee,
Lakadwala, Suresh Tendulkar Committee, NC Saxena Committee, Rangarajan Committee – A
general understanding of how each committee differed in their measurement.
 Example: Rangarajan Committee was set-up by Planning Commission in 2012; Methodology
used is ‘Monthly Expenditure of family of five’. According to the estimates- poverty per day per
person in urban area is 47 Rs and in rural area it is 32 Rs

 Inequality– how is it measured –Gini co-efficient , Lorenz Curve; concepts like relative
inequality, absolute inequality.
 Issues with employment, different types of unemployment like disguised unemployment,
underemployment etc; Globalization and its impact on labour.
 Demographic Dividend, Skill Development
 Development Indicators from International organisations like HDI, MPI (Multiple Poverty
Index), Millennium Development Goals etc

3. Inflation and Business Cycle

Focus:

 Inflation, Depression, Recession and related terms and concepts like deflation, disinflation,
reflation, stagflation, Philip’s curve
 Types of Inflation – based on the rate of growth of the prices– creeping, trotting, galloping,
hyper-inflation
 Types of Inflation – based on the causes– Demand-pull, Cost-push, Structural, Speculation.
 Impact of Inflation on Indian Economy, different stakeholders in the economy. Is a minimum
inflation necessary? If so why?

 Inflation measurements like CPI, WPI, GDP deflator

 Composition or what constitutes these indicators

 Their merits and demerits
 Which measurement is better indicator of inflation and why? Which index is used to measure
inflation in India currently?

 Base year from which it’s calculated.

 What is this Base year?

 Why does Government change the Base Year?
 What impact it has on the economic growth or inflation?
 Example: In WPI there are totally 676 items, out of that 20% weightage is given to Food,
14% to Power and Fuel, 66% to Manufactured goods. It does not include Services. Base year
for WPI is 2010-11. It is published by Ministry of Commerce and Industry

 Role of Government and RBI in controlling inflation

4. Money and Banking Systems

Focus:

 Role and functions of RBI

 Monetary Policy/measures taken by RBI like Bank rate, repo rate, reverse repo rate, Statutory
Liquidity Ratio (SLR), Cash reserve Ratio (CRR), Liquidity Adjustment Facility (LAF),
Marginal Standing Facility (MSF)

 Why are these measures taken?

 What impact it has on the Supply of money, Inflation and the Economy?
 Different types of Banks and their functioning– Commercial Banks, RRB’s, Development
banks, NABARD, Co-operative Banks, Development Banks, Merchant Banks, Non-Banking
Financial Company’s (NBFC’s), Regional Rural Banks (RRBs) etc.

 Functions of these Banks, to whom do they lend?

 How are these Banks regulated? Concepts like priority sector lending
 Example: NBFC’s are regulated by RBI, unlike the normal banks, NBFC cannot accept
demand deposits (DD); NBFCs do not form part of the payment and settlement system and
cannot issue ‘cheques’ drawn on itself.

 Banking reforms like Bank Nationalisation (1969, 1980) Basel Norms etc.

 Why were/are these reforms needed?

 What was/is the Purpose of these reforms

 Understand Key-Terms– Financial Inclusion, Fiscal Consolidation, Narrow Banking, Non-

Performing Assets, Shadow Banks, Weak Bank, Core Banking, Bank Run, Priority Sector
lending, Capital to Risk Weighted Assets (CRAR) etc., and other related concepts related to
Banking – what steps have been taken by the Government and RBI in this regard.

 Steps taken by government with regard to Financial Inclusion.

 Example: Introduction of Business Correspondent model in rural areas or Woman only
banks, Jan Dan Yojana, Micro-finance, Mudra Bank etc

 Recent Committee’s setup with regard to Banking Reforms and its important recommendations

5. Fiscal Policy:
A. Fiscal Measures
Focus:

 Fiscal policy, Finance Commission (14th FC and its important provisions)

 Fiscal Responsibility and Budgetary Management (FRBM) Act, other actions taken by the
Finance Ministry (Government), Disinvestment of Public Sector Units (PSU’s) to improve the
financial health of the Economy
 What is Financial Stability? Steps taken by Government in this regard

o Financial Sector Reforms brought about by the government in these sectors -Banking,
Insurance, Provident Fund (PF).

Example: In 2015, Raising of Foreign Direct Investment (FDI) limit in defence to 49%, In Railway
infrastructure to 100% etc.

 Financial Regulators – Reserve Bank of India(RBI), Securities and Exchange Board of

India(SEBI), Insurance Regulatory and Development Authority (IRDA), Pension Fund
 Regulatory and Development Authority (PFRDA) – powers, functions, jurisdiction issues
between the regulators
 Financial Stability and Development Council – objective and functions
 Economic Reforms– concepts related to privatization and globalization, SEZ’s etc.
 Sources of financial resources for Government – Tax and Non-tax revenue (Foreign aid,
Disinvestment from PSU’s etc), Disinvestment, Borrowings (internal and external), User
Charges.

B. Budget
Focus:

 Components of Budget, Revenue and Capital receipts and expenditure

 What constitutes Plan and Non plan expenditure? Difference between them.
 Key Terms like pubic debt, External debt, Internal debt, Revenue Deficit, Primary Deficit,
deficit financing, fiscal consolidation Zero-based Budgeting

o Steps taken by the government to bring down the Fiscal Deficit

Example: FRBM Act

C. Taxation
Focus:

 Direct, Indirect tax and other Taxes like Pigovian tax, Ad Valorem tax, Tobin Tax, Difference
between a Cess and a Surcharge
 Direct Tax like Corporate Tax, Income Tax, Wealth Tax, Stock Market transactions
 Indirect Tax like Excise Tax, Customs, VAT, Service tax

o Taxation Reforms – Direct Tax Code (DTC), General Anti-Avoidance

Rule (GAAR), Goods and Service Tax (GST).

Example: With regard to GST – Purpose; advantages and disadvatages of GST; issues with regard to
implementation of GST;

 Understand the basic concepts like what is Tax Base, Progressive taxation,Tax Expenditure, Tax
avoidance, Tax evasion, Tax Havens, Tax elasticity, Tax Buoyancy, Laffer curve, Crowding-out.

D. Planning
Focus:

 Institutions involved in Planning in India

o A general idea on how planning has evolved over the years (since Independence)
o How planning takes place at the State and National level

 New institution – Niti Ayog

 o Its purpose
o Why was Planning Commission dissolved?

 Issues between Planning Commission and Finance Commission

6. Market:
Focus:

 Money Market – Treasury Bills, Commercial paper, Certificate of Deposit, Call Money
 Capital Market – Government Securities (G-Secs)
o Difference between Money and Capital market
o A general idea about Stock-exchanges in India – BSE, NSE; Nifty (Abroad); What is
SENSEX- what does it indicate?

 Regulatory Bodies – SEBI, IRDA , PFRDA – their power, functions in regulating Market,
Mutual funds, Pension Fund etc.; reforms brought about by the Regulatory Bodies

 Foreign Direct Investment (FDI’s) and Foreign Institutional Investors (FII’s)

o On what basis are they classified as FDIs and FIIs?
o Differences between them
o Why are FII’s called ‘hot money’ or ‘Portfolio investment?
o Which type of investment would be better for India?

 Other investments such as Qualified Institutional Placement (QIPs) – Angel investors, Venture
Capitals, Foreign institutional investors, Mutual Funds, Public Financial institutions

 Have a Basic understanding of these terms– Primary market, Secondary market, Bull and Bear
(what does it symbolize), Derivatives, Futures, Bonds, Debentures – partially and fully
convertible , Participatory Notes, Hedge Funds, Blue chip shares, Market depth.

 Mechanisms to raise money in the Capital Market in India by Foreign countries- Indian
Depository Receipts (IDR’s); Similarly for an Indian company to raise money in the Foreign
market –Global Depository Receipts (GDR’s) and in America it is known as American
Depository Receipts (ADR’s)

7. Public Sector Public Sector Units (PSU’s)

Focus:

 Organisational Structure of PSU’s – Departmental Undertakings, Statutory Corporations,

Control Boards, Co-operative Societies, Companies registered under the Companies Act 1956
 Purpose/Objectives of PSU’s
 Reforms – post Liberalisation, Privatization, Globalisation (LPG) era- Disinvestment,
Memorandum of Understanding (MOUs), Miniratnas, Navaratna, Maharatna, New Companies
Act, 2013, Corporate Social Responsibility (CSR)

 What is Corporate Governance? What are its Objectives?

 Industry:
o A general idea about Industrial Policies in India
o Medium and Small-Scale Enterprises (MSME’s ), Small-Scale Industries (SSI), Village and
Cottage Industries (VCI)- On what basis are they classified so
o What measures are taken by Government to revive these industries?

8. External Sector/Foreign Trade

Focus:

 India’s Foreign Policy – recent initiatives taken

 Balance of Payment (BoP)

o What constitutes BoP?
o What do you understand by ‘Invisibles’? How does it affect BoP?

 External Commercial Borrowings (ECB)

o What does it constitute, what is it meant for?
o Who regulates it?
o Who borrows from it? Example: Corporate sector , Government

 Capital and Current Account Convertibility– India has full Current Account Convertibility
but when it comes to Capital Account Convertibility, it is only partial. Why?

 A general idea about MRTP Act, 1969; FERA, 1973; FEMA, 1999 – this will help you in
understanding the changes made to capital account convertibility and why India is yet to go
for full convertibility and what is the present status

 Current Account Deficit (CAD)

o What is CAD?
o Who reports CAD?
o Why India has huge CAD? Is a minimum CAD necessary? What are the measures taken by
India to reduce CAD?

 Rupee appreciation, depreciation

o How is Rupee value determined?
o How and why does Rupee appreciate or depreciate?
o Its impact on domestic and external market? On imports and exports.
o What measures does RBI take when rupee appreciates or depreciates? How does it impact
Forex Reserves?
o Difference between Depreciation and Devaluation of currency (in Indian – rupee) Why
does a country devaluate its currency?

 Currency Exchange rate

o How is the currency exchange rate determined?
o Who determines it ?
o Exchange rate interms of Purchasing power parity (PPP).
o What is Nominal Effective Exchange Rate (NEER), Real Effective Exchange Rate (REER)?
 Forex Reserves
o What does it constitute?
o What is the use of having Forex Reserve?
o Why do we need more Forex Reserves?
o How can we accumulate more Forex reserves?

 Concepts like Trade deficits, Elasticity of Demand, Savings, Investment, J-curve effect

 Comprehensive Economic Partnership Agreement (CEPA), Comprehensive Economic

Cooperation Agreement (CECA)
o Differences between the two agreements
o How is it different from Free Trade Agreement (FTA)?
o Benefits that Indian will have with these agreements
o A general awareness on the countries with which India has signed these agreements recently
and what are the issues involved and benefits from the same

Note: Issues like GAAR, Euro Zone Crisis, Gold imports or any issue that you come across in the
newspaper, make a note of it.

9. International Economic Organisations

Focus:

 Bretton Wood Twins- World Bank, IMF

o A general awareness on- When was it started? Where is its Headquarters?
o What is the purpose? To whom do they lend money to?
o How does It function?
o Reports published by WB and IMF
o Recently joined members of WB and IMF
o World bank and World bank Groups

o Relevance of IMF and WB to the developing countries (especially India)

Example: IMF was setup in 1944, its HQ- Washington, USA. Purpose- to facilitate balanced growth
of International trade, Exchange rate, to overcome Balance of Payment crisis and it lends only to
member countries and not for a specific purpose, unlike WB. Functioning- Each member is assigned
a quota (based on size of the economy), which indicates the voting power, access to financing, the
amount a member is obliged to provide to the IMF

 What are SDR’s? how does it help member countries?

 World Trade Organisation (WTO)

o A general idea on how WTO came into being and what was the set-up before WTO
o Difference between General Agreement on tariffs and Trade (GATT) and WTO
 o What is the objective of WTO? How does it function (example- WTO works on the principle
‘one country one vote’, unlike WB or IMF)
o Recently joined members of WTO

 Doha round – why is Doha round stalled? Issue’s between developed and developing countries

 WTO and India – how has it helped India, if so in what way? what are the issues- is it a boon or
a bane to India?

 WTO principles– Most Favoured Nation (MFN)- non-discriminatory Trade, General system of
Preference (GSP) for developing countries and Preferential Trade Agreement (PTA), Free Trade
Agreement (FTA) for economics integration

 Stages in economic integration – PTA > FTA > Customs Union > Monetary Union

 Others Safeguard mechanisms– Safeguard Mechanisms, Sanitary and Phytosanitary agreement

(SPS), Technical Barriers to Trade (TBT)

 WTO agreements

1. Agreement on Agriculture(AoA) – Domestic support (Green Box, Amber Box, Blue Box),
Export subsidies, Market access

2. Agreement on TRIPS and Patent Issues

 Make a note of the current issues related to Patent;

 Copyrights, Trademark, Industrial Design right – for what type of products are each
given

Example: Copyrights for creative and artistic work, whereas Patents for inventions

 TRIPS agreement and Safeguards – Parallel importation, Compulsory Licensing

 Geographical indicators – significance; to what products and for whom are they granted to? A
general awareness on the latest products which have been granted the status

3. General Agreement on Trade in Services (GATS)

 Difference between Protectionism and Import Substitution

 instruments of protectionism- tariffs, import quotas, administrative barriers, anti-dumping duties,

direct or export subsidies, exchange rate manipulation

 A general idea about Anti-Counterfeiting Trade Agreement (ACTA) by World Intellectual

Property Organisation (WIPO), Non-Agricultural Market Access (NAMA) group, NAMA 11
 Regional trade agreements and Regional Groupings like ASEAN FTA, SAFTA,
MERCOSUR, BRICS, SAARC, The Asia-Pacific Economic Cooperation (APEC), Trans-Pacific
Partnership (TPP), G20 etc.
o their objectives
o recent summits especially where India is a major player in the grouping
o recent initiatives undertaken in the summits
o how do these initiatives help India?

Example: BRICS (Brazil, Russia, India, China and South Africa) latest summit (2014) was held
in Brazil. Here, they came up with an initiative to create US$100 billion New Development Bank
(NDB). NDB is seen as an alternative to the existing US-dominated World Bank and IMF. The
bank is set up to foster greater financial and development cooperation among the five emerging
markets. Unlike the World Bank, which assigns votes based on capital share, in the New
Development Bank each participant country will be assigned one vote, and none of the countries
will have veto power.

Note: Make a note of the International Economic organisations to which India is not a member
of; and on Asian Development Bank (ADB), G4.

10. Economic Survey

Focus:
Make note of the Key terms and their meaning, especially the new ones. Since UPSC has the knack
of picking up specific terms from the Economic Survey in both Prelims and Mains Exam.

Note : Economic Terms– Inflation, Recession, Depression, Balance of Payment, Financial

Inclusion, Fiscal Consolidation, Deficit Financing, Overheated Economy, Fiscal drag, Fiscal
Neutrality, Giffen goods etc. – Basic understanding of the key terms is important.

11. Social Development, Poverty and Inclusion:

This is a dynamic area as questions will be mostly related to recent developments and programs and
policies of the government to address issues related to poverty, inclusion, growth and development. It
has a wider perspective and also is linked with the current events.
Example: Malnutrition- reasons associated with it, Poverty Indexes like Multi-poverty Index,
committees set up like Rangarajan committee’s estimate of Poverty, BPL, APL, Income gap, Jan Dan
Yojna etc.

12. Demographics:
This section overlaps with Human geography. Statistical data from Economic Survey will be helpful
here like population, working age of the population, sex-ratio, literacy, Maternal Mortality Rate
(MMR), Infant Mortality Rate (IMR) etc

 What are the issues (Ex: low literacy ),

 Measures taken by the government in this regard.

13. Social Sector initiatives:

This part is already covered under Public Policy & Right’s issue under ‘Polity’.